Member Sign In

You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate but affiliated companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.

If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.

Accenture reported third quarter 2011 net revenue of $6.72 billion, up 20.6% from $5.57 billion reported in the year-ago quarter. Net revenue was well above the company’s guided range of $6.30 billion to $6.50 billion and the Zacks Consensus Estimate of $6.21 billion.

The results included a four percentage point positive impact from foreign currency. The meaningful growth in net revenue may be attributed to the significant increase in revenues across Accenture’s operating segments and healthy demand for its offerings across the industries served.

On a year-over-year basis, revenues increased 25.4% for Financial Services, 22.5% for Communications & High Tech and 20.4% for Product. Revenues from Resources were up 27.9%, while Health & Public Services Group revenues grew 4.8% from the year-ago quarter. Other revenues grew 11.8% year over year.

Consulting and Outsourcing revenues increased 23.0% and 17.4% from last year to $3.97 billion and $2.75 billion, respectively.

Geographically, year-over-year increases of 16.2%, 20.6% and 38.4% were seen in top-line contributions from the Americas, Europe Middle East and Africa (EMEA) and the Asia Pacific, respectively.

The third quarter gross margin dropped 30 basis points year over year to 34.4%. The utilization rate dropped 100 basis points year over year to 86.0%. The decrease in gross margin was also attributable to higher subcontractor costs, recruiting and training costs as well as an increase in annual compensation.

Total operating expenses grew 20.9% year over year due to increases of 16.5% in sales and marketing expenses and 28.6% in general and administrative expenses. However, as a percentage of net revenue, operating expenses remained flat with the year-ago quarter. The operating margin was 14.1% compared to 14.5% in the year-ago quarter.

Accenture reported net income of $692.0 million or 93 cents a share, up from $557.5 million or 73 cents in the year-ago quarter. One-time items in the quarter were insignificant. The effective tax rate was 27.0% compared to 29.8% in third quarter of 2010.

Balance Sheet & Cash Flow

Operating cash flow was $1.35 billion in the reported quarter compared to $601.1 million in the prior quarter. Net property and equipment additions were $112.7 million, up from $78.6 million in the prior quarter. Days of services outstanding remained unchanged from the previous quarter at 32.

Total cash balance as of May 31, 2011 shot up to $5.26 billion from $9.87 billion in the preceding quarter. Lower cash balance was due to huge cash outlay in investing and financing activities. Accenture carries a total debt burden (long term plus short term) of $4.7 million.

Share Repurchase and Dividend

During the third quarter, Accenture repurchased 11.4 million of its common outstanding shares at a total value of $644.0 million. The activity includes 9.7 million shares repurchased in the open market. As of May 31, 2011 Accenture had roughly $1.7 billion shares outstanding under the current authorization.

Accenture also paid a semi-annual cash dividend of 45 cents per share in the reported quarter.

Guidance

For the fourth quarter of fiscal 2011, Accenture expects net revenue in the range of $6.4 billion to $6.6 billion. This figure was arrived at after taking into consideration an 8% positive foreign-exchange impact. The Zacks Consensus Estimate for earnings is 81 cents.

For full fiscal 2011, Accenture assumes a positive foreign-exchange impact of 3% on revenue. Net revenue growth is projected in the range of 14.0% to 15.0%, up from the previously announced range of 11.0% to 14.0%. Expectations for new bookings were maintained in the range of $25.0 billion to $28.0 billion, though management remains somewhat concerned about the contribution from Japan.

The company also reiterated its operating margin guidance at 13.6% to 13.7% but expects the annual tax rate to be between 27.0% and 28.0% (previously 28.0–29.0%). Diluted EPS expectation has been raised to $3.36–$3.40 from the previously guided range of $3.22–$3.30. The earnings guidance is above the Zacks Consensus Estimate of $3.27.

We find Accenture’s third quarter results encouraging, as both top and bottom lines strongly beat the Zacks Consensus Estimates. Based on improving business momentum and market share gains, Accenture raised its revenue and earnings guidance for fiscal 2011. Moreover, we are encouraged by the steady flow of new business and believe that the trend will continue.

Apart from this, we remain optimistic about Accenture’s deal wins from various industry verticals. We also think Accenture’s recent acquisitions enrich its product portfolio. However, increasing competition from IBMInc. (IBM - Analyst Report) may temper growth prospects to some extent.

Top Zacks Features

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

Zacks Research is Reported On:

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1986 it has nearly tripled the S&P 500 with an average gain of +26% per year. These returns cover a period from 1986-2011 and were examined and attested by Baker Tilly, an independent accounting firm.

Visit performance for information about the performance numbers displayed above.